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Print articleJorge Carey:“Analyzing the Repeal or Modification of DL600 is an Issue that Can be Discussed”
December, 2013 -
Jorge Carey:“Analyzing the repeal or modification of DL600 is an issue that can bediscussed”
Jorge Carey, who has been involved in several businesses with foreigninvestors, has doubts about a reform, believing that it is not a good idea thatthis type of changes are implemented by a left or center-left governmentsbecause it risks to bring unnecessary (political) noise.
- What is your opinion on Michelle Bachelet’s proposalto repeal DL 600?
Before answering your question, I would like to make certainconsiderations: normally, investors who invest outside their own countries,closely examine the record of such countries in the last four or five decadesin the most relevant issues when making their economic decisions, including thepolitical stability, macroeconomic equilibrium, presence or absence ofcorruption, access to the foreign exchange markets to repatriate theirinvestments and profits and to service foreign credits, reasonable and foreseeabletaxation, implementation of public policies that do not discriminate againstforeigners and an effective property protection over their investments andprofits. The existence of investment contracts, executed under statutes like DL600, which guarantee all of the above, may incentivize the making of aninvestment but are much less important than a positive result of an exam suchas the one mentioned above. Indeed, such agreements may be changed by thepolitical will of any future Congress or administration holding power throughchanges that may deprive them of their legal support, as sadly occurred in thepast in Chile through constitutional changes. Moreover, at present, thearbitrary acts of States, including expropriations without fair compensation, are not challenged in the courtsof the expropriating country but rather in international tribunals created byinternational investment protection treaties which cannot be unilaterallyterminated with retroactive effects. Answering your question and in view of theabove, it appears to me that the repeal of DL 600 is a subject which may bediscussed. It should be done, however, without ideological biases and takinginto account always the best interests of Chile. But if a possible repeal of DL600 is made with the declared intent of increasing taxation of foreign investments–and only foreign ones- that, in itself, may be very negative for the flow ofnew capital into Chile.
- Do you believe that the end of this investmentmechanism may affect inflows of investment into Chile?
The great majority of the investments made into Chile under DL 600probably will not be affected. But the more complex ones, the long term ones,the bigger ones, those which may really interest Chile in mining and energy,possibly yes. To have assurances that there will be access to the foreignexchange markets in projects which mature in long periods of time or are funded from abroad or which exporttheir products, may be a determining factor for some investors. The drama whichforeign investors are presently experimenting in Venezuela and Argentina is animportant example of this. In addition, the fear that mining royalties may keepincreasing not in line with the general taxation of a country may also bedisincentive that can be corrected in a contract with the host country, undercertain circumstances. More than special treatments, those who invest incountries that are not their own do not want to be discriminated on the basisof their nationality or the activities they undertake. Investors have thesophistication to search what is the motivation behind the elimination of DL600 rather than the repeal itself. Irrespective of this, I do not believe it isa good idea that these kind of changes are implemented by a left or center leftadministration – and at the beginning of its term – because it makesunnecessary noises in relation to a subject where there exists a certainconsensus looking into the future.
- In case it were eliminated, ¿which features of DL600 do you believe it would be necessary to preserve, because of their benefitsto foreign companies?
I would like to see in existence a legal body for all investors, whichwould apply to Chileans as well as to foreigners. This body should guarantee,to all, certain rights such as the access to the foreign exchange market toservice international loans, the maintenance of certain levels of taxationduring the critical years during which investments mature and the right to notsee the benefits of their work and investment adversely affected by futurepolitical administrations.
